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Compromise Achieved to Reform Alaska’s Unsustainable Oil Tax Credit System

Lawmakers Agree to End Practice of Paying Cash for Tax Credits


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Juneau – Tonight, the Alaska Legislature passed a compromise version of legislation to reform Alaska’s system of subsidizing the oil industry on the North Slope with tax credits. House Bill 111ends Alaska’s unique cash for tax credits system and strengthens the four percent minimum tax to ensure Alaska receives some production tax revenue in times of low oil prices. Tonight’s compromise was brokered by House Resources Committee Co-chair Representative Geran Tarr(D-Anchorage), who served as the Chair of the HB 111 Conference Committee.

“I’m pleased a compromise was reached on House Bill 111 that includes the critical feature of eliminating cash credits. There were significant disagreements about how to achieve reform and that simply took some extra time to work out,” said Rep. Tarr. “I appreciate the hard work of the Conference Committee members and every lawmaker who had a hand in crafting and passing this significant piece of legislation. However, our work is not over. We have a working group as part of this legislation that will keep us working with our Senate colleagues. Our production tax revenue will continue to play a significant role in our future and is an essential piece of our comprehensive fiscal plan.”

One of the most significant provisions of HB 111 ends Alaska’s cash for tax credits system retroactively to the first of July with provisions that allow companies to recover their costs through lower production tax payments once a project is producing oil or gas. This incentivizes actual production and protects the State of Alaska from huge future liabilities to cover losses from non-producing projects.

“HB 111 does several important things including authorizing the creation of a working group to do the hard work and the analysis to come up with additional improvements to Alaska’s still flawed oil tax system,” said House Resources Committee Co-chair Rep. Andy Josephson (D-Anchorage), who sat on the HB 111 Conference Committee.

An important compromise provision included in HB 111 is a limited form of ring-fencing, which stipulates that losses incurred from fields that are not producing oil cannot be written-off against fields that are producing oil and gas. Instead, ring-fenced losses can only be written-off when the field where they were incurred comes into production.

“By reforming Alaska’s unsustainable oil tax credit system, we move one step closer to the kind of comprehensive fiscal plan we need to protect our economy, address the fiscal crisis, and respond to the ongoing recession. However, one step is not enough with projected deficits of $2 billion or greater for years to come,” said Speaker of the House Rep. Bryce Edgmon (D-Dillingham).

The compromise version of House Bill 111 passed the Alaska House of Representatives tonight by a vote of 33-6. The Alaska State Senate passed the bill by a vote of 18-0. HB 111 will now be sent to Governor Walker for his signature. 

After tonight’s passage of HB 111, both the House and Senate ended the Second Special Session of the 30th Alaska State Legislature Sine Die.

For more information, please contact Alaska House Majority Coalition Press Secretary Mike Mason at (907) 444-0889.

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